1.You should invest in any project that has an IRR equal to or exceeding the _____.

Definition

a.MARR

Term

1.Which of the following are steps for computing the ERR that belong to a more convenient, but approximate procedure that finding a precise ERR?

Definition

a.Take all net receipts forward at the MARR to the times of the last cash flow

b.Take all net disbursements forward at an unknown interest rate also to the time of the last cash flow

c.Equate the future value of the receipts from the first step of the procedure to the future value of the disbursements for the second step of the procedure and solve for

d.All of the above

Term

1.The IRR is the interest rate at which a project ____.

Definition

a.Just breaks even

Term

1.The salvage value of an asset can be estimated using a depreciation model.

Definition

TRUE

Term

1.The book value is usually taken as the actual value an asset can be sold for in an open market.

Definition

FALSE

Term

1.An asset starts to lose value as soon as it’s purchased.

Definition

TRUE

Term

1.A declining-balance method in which the depreciation rate is calculated as 1.5/N for a service life of N years is known as:

Definition

a.150%-declining balance

Term

1.Bicycles have a limited life span because the tires wear out. This is an example of:

Definition

a.Use-related physical loss

Term

1.An asset is purchased for $5,000. The salvage value at the end of its four year life is $1000. What is the annual depreciation charge assuming the rate of loss in asset value is constant.

Definition

a.1000

Term

4.Graphically the ____ of an asset can be determined by drawing a straight line between its first cost and its salvage value when using the straight-line depreciation method.

Definition

a.Book Value

Term

1.Savings (reducing expenses) increase the profits of a firm and therefore they are taxed.

Definition

TRUE

Term

1.The effective cost of purchasing an asset is less than its first cost.

Definition

TRUE

Term

1.Capital purchases cannot usually be fully claimed as an expense in the year in which the purchase occurred.

Definition

TRUE

Term

1.If an investment yields a profit, the total investment price will be taxed.

Definition

FALSE

Term

1.What would the after-tax MARR be on an investment with a before-tax MARR of 16% for a company who pays 30% corporate taxes?

Definition

11.2%

Term

1.The CCA system specifies the ______ rate a firm can use to depreciate its assets for tax purposes, known as the CCA rate.

Definition

a.Maximum

Term

1.Personal income taxes usually exhibit a:

Definition

a.Progressive tax rate

Term

1.In the early years of an asset’s life, the capital costs per year always dominate total yearly costs.

Definition

FALSE

Term

1.In the replacement case where the defender and challenger are identical, it is not necessary to assume that the two options are technologically identical.

Definition

FALSE

Term

1.Sunk costs are irrelevant to any decision to replace the current asset.

Definition

TRUE

Term

1.Capital cost is incurred by the difference between what is paid for the asset and what the asset could be resold for some time after purchase.

Definition

FALSE

Term

1.Purchase of a long-lived asset implies which of the following?

Definition

a.Capital cost

b.Maintenance cost

c.Operating cost

d.Installation cost

e.All of the above

Term

1.It is ____ true that capital cost per year falls with increasing life.

Definition

a.Usually

Term

1.The costs discussed in Chapter 13 can be related to the more general ideas of ___ and ___ costs.

Definition

a.Fixed, variable

Term

1.The above below figure shows that a basket of goods that cost $100 in 2002 would have cost approximately $60 in 1984 and $20 in 1970.

[image]

Definition

TRUE

Term

1.The actual MARR is the real MARR plus an upward adjustment that reflects the effect of inflation

Definition

TRUE

Term

1.The inflation rate is the rate of increase in average prices of goods and services over a specified time period, usually a year.

Definition

TRUE

Term

1.To judge whether an index is appropriate for a particular purpose, the analyst should know how the _______

Definition

a.Goods and services for which he or she is estimating inflation compare with the set of goods and services use to compute the index

Term

1.Inflation can also be viewed as ____ the purchasing power of money over time.

Definition

a.An increase in

b.A change in

c.An interest rate change in

d.A published number describing

e.None of the above

Term

1.Typically a price index relates the average price of a given set of ____ in some time period to the average price of the same ____ in another period.

Definition

a.Goods

Term

1.A decision tree is a graphical representation of the logical structure of a decision problem in terms of the sequence of decisions to be made and outcomes of chance events

Definition

TRUE

Term

1.A random variable is a parameter that can take on a number of possible outcomes

Definition

TRUE

Term

A break-even analysis could be used to ______

Definition

a.Determine the MARR that results in a zero present worth

b.Determine what parameter value causes the performance measure to reach some threshold

c.Compare multiple projects

d.Determine the revenues required to produce a zero annual worth

e.All of the above

Term

1.Decision trees are a graphical means of structuring _______

Definition

a.A decision-making situation

Term

1.The expected value associated with the node farthest to the left in a decision tree is the expected value of the overall decision.

Definition

TRUE

Term

1.EV is an acronym for “expected variable”.

Definition

FALSE

Term

1.____ is an approach to project evaluation that can be used to gain a better understanding of how uncertainty affects the outcome of the evaluation by examining how sensitive the outcome is to changes in the uncertain parameters.

Definition

a.Sensitivity analysis

Term

1.The severity of negative consequences in a project’s life span is…

Definition

a.Minimal early in the project’s life.

Term

1.A project organization can choose to ____ risk.

Definition

a.Accept

b.Share

c.Transfer

d.All of the above (d. Correct Answer)

Term

1.He knew instinctively that his professor wouldn’t appreciate it if he brought his single scoop of vanilla ice cream into the lecture room with him. He could almost hear the inevitable question, “Did you bring enough for everyone?” To avoid such an embarrassment, he practically inhaled his frozen confection as he raced down the hall. He had eaten ice cream this way before and knew he would soon have an ice cream headache. This is an example of an event that is …

Definition

HIGH IN PROBABILITY AND LOW IN CONSEQUENCE

Term

1.Which of the following is NOT one of the risk management steps?

Definition

a.Planning and scheduling

Term

1.In determining relevant risks and formulating proactive strategies for their mitigation, the project team can pay a little in terms of extra time and cost initially, or it must be prepared to…

Definition

a.Pay potentially exorbitant amounts of time and money in the future. (a. Correct Answer)

Term

1.Any number of risks of a relatively minor nature may be present in a project as a matter of course. However, because the likelihood of their occurrence is so small or the consequences of their impact are so minor, they may be judged ____ and ignored.

Definition

___acceptable___

Term

In many cases the best source of information on future risks is ___

Definition

history___

Term

1.Many project organizations create relationships with suppliers and customers that include ____requirements for risk to be shared among those involved in the project.

Definition

_legal_

Term

1.Change is made by _____

Definition

a.People

Term

1.There are four classic outcomes from change, which reflect the risks and the ways to avoid them. They are: the disaster, the lost investment, the _______ and the ideal

Definition

a.Partial success

Term

1.The duration and structure of change initiatives vary significantly, but all have a degree of complexity and…

Definition

a.Are outside the normal daily workload

Term

1.One significant cost that is often forgotten is the effect on the time of everyone affected by change. Many people in the organisation will need to give up time to …

Definition

a.Explain how things work to those involved in designing changes.

b.Be consulted on the effectiveness and realism of planned change.

c.Be trained and have changes explained to them.

d.All of the above

Term

1.Very broadly, change initiatives can be categorized into three main types, which of the following is NOT one of them?

Definition

a.Contingency or crisis change

Term

1.This diagram represents:

[image]

Definition

a.The disaster

Term

This diagram represents :

[image]

Definition

a.The ideal

Term

1.The diagram represents:

[image]

Definition

The lost investment

Term

1.There are a variety of changes in terms of scope and approach. Change requires a combination of creating ________which enable the change and change management ______ to encourage change to occur

Definition

Deliverables & Activities

Term

1.There are two main dimensions to every change: the ________ dimension dealing with the responses of individuals, and the _______ dimension ensuring the change is compatible with your operations.

Definition

Human & Organizational

Term

1.An ideal outcome from a change is when the risks from change (or every component of change) are ______and appropriate ___________ ___________are put in place.

Definition

Understood & Mitigating activities

Term

1.One of the most important activities of change management is selecting and prioritizing the optimal change(s) to undertake at any time, balancing________ term operational needs with _______ term strategic vision.

Definition

Short & Long

Term

1.One of the most important activities of change management is assessing the___________risks from change, and ensuring ___________ is taken to manage these risks, including the longer-term execution risks.